1 answer

Problem 22-13 OneChicago has just introduced a single-stock futures contract on Brandex stock, a company that...

Question:

Problem 22-13 OneChicago has just introduced a single-stock futures contract on Brandex stock, a company that currently pays
b. If the Brandex price drops by 7%, what will be the new futures price and the change in the investors margin account? (Rou
Problem 22-13 OneChicago has just introduced a single-stock futures contract on Brandex stock, a company that currently pays no dividends. Each contract calls for delivery of 900 shares of stock in 1 year. The T-bill rate is 9% per year. a. If Brandex stock now sells at $210 per share, what should the futures price be? (Round your answer to 2 decimal places.) Futures price $ 220.78 b. the Brandex price drops by what will be the new futures price and the change in the investor's margin account? Round "Futures price ( new"answer to 3 decimal places and other answer to the nearest dollar amount. Negative amount should be indicated by a minus sign) $ Futures price now) Change in the stor's mar 213.691 20 t s C. If the margin on the contracts SM000, what is the percentage return on the investor's position (Round your answer to places. Negative amount should be indicated by a minus sign) < Prev 4 of 5 ! Next > ge and
b. If the Brandex price drops by 7%, what will be the new futures price and the change in the investor's margin account? (Round "Futures price (new)" answer to 3 decimal places and other answer to the nearest dollar amount. Negative amount should be indicated by a minus sign.) $ Futures price (new) Change in the investor's margin account 213.691 192 322 s c. If the margin on the contract is $14.000, what is the percentage return on the investor's position? (Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.) Percentage return on the investor's position < Prev 4 5 Next > ÔSó :: cmd

Answers

a)
Futures price = Spot price × (1 + Risk Free rate)
= $210 * (1 + 9%)
= $228.90

b)
Futures price = Spot price × (1 + Risk Free rate)

Spot price = $210 * (1 - 7%) = $195.30

Future price = $195.30 * (1 + 9%)
= $212.877

Change in futures price = $212.88 - $228.90 = -16.023

Change in margin account = -16.023 * 900 = -14,420.70 or -14,421


c)
Return (%) = -14,420.70 / 14,000
= -103.01

.

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